Adrian Johnson
TLDR:
– The SEC has allowed certain firms to exempt themselves from controversial crypto accounting guidance by demonstrating proven procedures and technology for customer crypto recovery in bankruptcies.
– Firms have sought advice from the SEC on developing new policies and procedures related to cryptocurrency since the release of SAB 121 in March 2022.
Article Summary:
Some companies and financial institutions have proposed business practices that the U.S. Securities and Exchange Commission (SEC) staff have agreed would allow them to fall outside of controversial crypto accounting guidance. This exemption is based on proven procedures and technology for customer crypto recovery in bankruptcies. The release of Staff Accounting Bulletin No. 121 (SAB 121) in March 2022 prompted firms to seek advice from the SEC on developing new policies and procedures related to cryptocurrency. Since the release of SAB 121, cases related to bankruptcies in the crypto industry have emerged, leading firms to consult with the SEC. The SEC source mentioned that SAB 121 has not changed but firms have demonstrated the ability to set up procedures and technology that allows customers to recover their crypto assets similar to traditional assets during bankruptcy, thus exempting them from the SAB 121 requirements.
The SEC has been in consultation with the industry regarding SAB 121 since its issuance. Additionally, there have been legislative efforts to overturn SAB 121, with some members of Congress introducing a resolution to overturn the bulletin. However, these efforts were unsuccessful due to a veto by President Joe Biden. The House has attempted to override the veto, but the measure failed. The SEC has been working with industry stakeholders to make modifications to SAB 121 that would enable well-regulated entities like custody banks to offer crypto custody services in line with the guidance.
